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Suppose that the index model for stocks A and B is estimated from excess returns with the following results: R A = 3 . 2

Suppose that the index model for stocks A and B is estimated from excess returns with the following results:
RA=3.20%+1.10RM+eA
RB=-1.40%+1.25RM+eB
M=30%;R-square A=0.28;R-square B=0.12
Assume you create a portfolio Q, with investment proportions of 0.40 in a risky portfolio P,0.35 in the market index, and 0.25 in T-bill.
Portfolio P is composed of 70% Stock A and 30% Stock B.
Required:
a. What is the standard deviation of portfolio Q?
Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is
provided as 20%. Do not round intermediate calculations. Round your answer to 2 decimal places.
b. What is the beta of portfolio Q?
Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is
provided as 20%. Do not round intermediate calculations. Round your answer to 2 decimal places.
c. What is the "firm-specific" risk of portfolio Q?
Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is
provided as 20%. Do not round intermediate calculations. Round your answer to 4 decimal places.
d. What is the covariance between the portfolio and the market index?
Note: Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is
provided as 20%. Do not round intermediate calculations. Round your answer to 2 decimal places.
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